Treasury yields at 2011 low on worries over Europe

Spooked by a spreading European debt crisis, traders again flocked to the safety of U.S. Treasury bonds, sending the yield on benchmark 10-year note to its lowest point this year.

Bond yields declined Friday on fears that European banks are vulnerable to the debt crisis that is engulfing Greece and other countries. Moody's warned of downgrading the credit worthiness of some Italian banks, which sent their stocks plummeting.

The yield on the 10-year Treasury note fell as low as 2.86 percent and was trading at 2.87 percent late Friday. That's down from 2.90 late Thursday. Its price rose 63 cents for every $100 invested. Bond yields fall when their prices rise.

This week's lower yields could mean that the U.S. Treasury's cost to issue new debt will fall next week. A series of debt auctions are on tap: $35 billion in two year notes on Monday, $35 billion in five-year notes on Tuesday and $29 billion in seven-year notes on Wednesday.

The price of the 30-year bond fell 28.1 cents, sending its yield up to 4.18 percent from 4.17 percent Thursday.

The yield on the two-year Treasury note fell to 0.32 percent from 0.35 percent. The yield and the discount on the three-month T-bill were both 0.01 percent.